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Sunday, September 27, 2015

What Recovery? 9.4 Million More Americans Below Poverty Line Than Pre-Crisis

According to Janet Yellen, we are still on pace to raise rates in 2015.
While the rate hike was supposed to happen this month, it got derailed
by the August market selloff, volatility in China, lackluster work force
numbers, and a variety of other factors.
Despite the Fed continuing to kick this down the road, they continue to claim that we are in the middle of an ongoing recovery. There’s just one problem with that: things are getting worse than pre-crisis levels for millions of the poorest Americans.

It’s true that the wealthiest 10% of Americans have finally
seen their household incomes rise above the levels last seen in 2007.
It’s also true that median incomes have “recovered” from the worst of
the 2008 disaster. Median earners were -8.1% worse off in 2011, and now they are only -6.5% worse off according to most recent data for 2014 released by the U.S. Census Bureau last week.However, when we look at the lowest 10% of income earners, the situation is much more precarious.
In 2011, the bottom 10% of households were -9.0% worse off in terms of
income than they were pre-crisis. Since then, it hasn’t gotten any
better: they now are making -11.6% less income than they were in 2007.Possibly even more concerning is the fact that the amount of Americans living below the poverty line has soared since 2007.
There are now 9.4 million more people that can claim to be a part of
this unfortunate group, and the total contingent living below the
poverty line now makes up 14.8% of all Americans. This is also an
increase from the 12.5% figure from before the Great Recession.What’s the difference between 2007 and today? One
stark contrast is the fact that the Fed’s balance sheet has exploded by
adding $3.5 trillion of phony money to its balance sheet (that’s about
the size of Germany’s economy) with its Quantitative Easing (QE)
program. As part of the same experiment, it kept rates artificially low
at near 0% for a record amount of time to encourage both lending and
economic growth.However, it is seven years later, and we are starting to see
the fruits of this experiment especially in terms of wealth inequality.
Studies and economists are starting to sound off, noting that QE and
ZIRP have been a failure for America’s poorest. We explained the basics
in a previous chart, but here’s some other articles worth reading from Forbes, WSJ, andSCMP that help show the effect of these policies.By the way, the St. Louis Fed has essentially admitted QE was a mistake, while the Philadelphia Fed also
admitted that these policies likely helped cause income inequality.
Even fragilista economist Joseph Stiglitz has said this summer thatZIRP has helped increase income inequality.Source: Visual Capitalist